Johnson v. State

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
KIM JOHNSON, )
)
Employee-Appellant, )
) C.A. No. N19A-12-010 ALR
v. )
)
STATE OF DELAWARE, )
)
Employer-Appellee. )
Submitted: October 15, 2020
Decided: December 31, 2020
On Appeal from the Industrial Accident Board
AFFIRMED
MEMORANDUM OPINION
Matthew M. Bartkowski, Esquire, Bifferato Gentilotti, LLC, Attorney for
Employee-Appellant
John J. Klusman, Jr., Esquire, Jocelyn N. Pugh, Esquire, Tybout, Redfearn & Pell,
Attorneys for Employer-Appellee
Rocanelli, J.
This matter is before the Court on an appeal from a decision of the Industrial
Accident Board (the “Board”) concerning the proper calculation for reimbursement
of a worker’s compensation lien after a third party tort suit is resolved. In this case,
the lien amount was greater than the amount recovered from the third party. For the
reasons stated herein, this Court concludes that the Board correctly ruled that the
worker’s compensation lien should be reduced by the entire amount of the recovery,
including the full expenses paid in attorneys’ fees and costs to achieve the recovery
of policy limits.
Background
Kim Johnson (“Johnson”) was employed by the State of Delaware as a DART
bus driver. Johnson was injured when another driver struck the bus Johnson was
driving. Consistent with the worker’s compensation no-fault scheme, Johnson
received worker’s compensation for her work-related injury. The total amount she
received in worker’s compensation was $109,923.37. Johnson pursued a tort claim
against the driver who was responsible for the accident that resulted in Johnson’s
injuries. That lawsuit was settled for the other driver’s policy limits of $100,000.00.
The attorneys’ fees and costs totaled $40,045.52 to achieve the recovery of policy
limits from the other driver.
1
Board Decision
The Board concluded that the employer and its worker’s compensation
carrier1 are responsible for the entirety of fees and costs of $40,045.52 to achieve the
recovery; that Employer should receive balance of the recovery in the amount of
$59,954.48; and that Employer’s worker’s compensation lien is thereby reduced by
$100,000.00 for a remaining lien balance of $9,923.27.2 According to the Board,
this apportionment is mandated by the statute,3 consistent with case law,4 and is an
equitable result.5
Standard of Review
This matter involves a legal determination by the Board. In considering an
appeal from a Board decision, this Court reviews the Board’s legal determinations
de novo, which “requires the Court to determine whether the Board erred in
formulating or applying legal principles.”6
1
The State of Delaware and its worker’s compensation carrier are referenced
hereinafter as “Employer.”
2
Johnson v. State, No. 1465010 (Del. I.A.B. Dec. 23, 2019).
3
Reimbursement of a workers’ compensation lien from a third party settlement
recovery is addressed in 19 Del. C. 2363(e). Apportionment of the expenses of
recovery is addressed in 19 Del. C. 2363(f).
4
Keeler v. Hartford Mut. Ins. Co., 672 A.2d 1012 (1996) is the controlling decision.
5
The Delaware Supreme Court consistently emphasizes that the calculation of
recovery of a worker’s compensation lien and apportionment of recovery expenses
must be equitable. See id. at 1016.
6
Estate of Fawcett v. Verizon Del. Inc., 2007 WL 2142849, at *5 (Del. Super. July
25, 2007); see Hudson v. State Farm, 569 A.2d 1168, 1170 (Del. 1990).
2
Discussion
The Board correctly applies the priority of recovery for reimbursement of a
worker’s compensation lien from third party recovery,7 as well as the calculation of
apportionment of the reasonable expenditures.8 The goal of the worker’s
compensation statute is to provide a no-fault scheme for prompt payment of medical
expenses and lost wages associated with work-related injuries.9 The statute provides
7
Pursuant to 19 Del. C. § 2363(e):
In an action to enforce the liability of a third party, the plaintiff may
recover any amount which the employee or the employee’s dependents
or personal representative would be entitled to recover in an action in
tort. Any recover against the third party for damages resulting from
personal injuries or death only, after deducting expenses of recovery,
shall first reimburse the employer or its workers’ compensation
insurance carrier for any amounts paid or payable under the Workers’
Compensation Act to date of recovery, and the balance shall forthwith
be paid to the employee or the employee’s dependents or personal
representative and shall be treated as an advance payment by the
employer on account of any future payment of compensation benefits,
. . . reimbursement shall be had only from the third party liability insurer
and shall be limited to the maximum amounts of the third party’s
liability insurance coverage available for the injured party, after the
injured party’s claim has been settled or otherwise resolved.
19 Del. C. § 2363(e) (emphasis added).
8
Pursuant to 19 Del C. § 2363(f):
Expenses of recovery shall be the reasonable expenditures, including
attorney fees, incurred in effecting such recovery. Attorney fees, unless
otherwise agreed upon, shall be divided among the attorneys for the
plaintiff as directed by the court. The expenses of recovery above
mentioned shall be apportioned by the court between the parties as their
interests appear at the time of said recovery.
19 Del C. § 2363(f).
9
Moss Rehab v. White, 692 A.2d 902, 909 n.12 (Del. 1997).
3
that the employer has an automatic lien against any third party recovery.10 Because
an employer is required to pay benefits for work-related injuries even when the
employer is not at fault for those injuries, the worker’s compensation statute
provides that recovery can be sought from a third party when the third party is
actually at fault for the work-related injury.11 Either the injured worker can pursue
recovery from a third party or, if the injured worker does not do so within a specified
period of time,12 then the employer may file suit on behalf of the injured worker to
recover its lien.13 Regardless of whether the employer or the injured worker initiates
claims against the third party, the statute prohibits double recovery by the injured
worker,14 mandates how any recovery is divided15 and also directs how expenses are
apportioned.16
According to the worker’s compensation statute, first, from the amount
recovered from a third party, attorneys’ fees and costs are deducted. Second, the
10
See 19 Del C. § 2363.
11
19 Del C. § 2363(a).
12
Requiring the employee (or the employee’s dependents or their personal
representative) to commence an action within 120 days after the occurrence of the
personal injury. 19 Del C. § 2363(a).
13
19 Del C. § 2363(a).
14
See Bell Atl.-Del., Inc. v. Saporito, 875 A.2d 620, 624 (Del. 2005) (“[D]ouble
recovery is not only an inequitable result, it contravenes both the text of and policy
behind Delaware’s insurance and labor statutes.”); see also 19 Del C. § 2363.
15
19 Del C. § 2363(e).
16
19 Del C. § 2363(f).
4
worker’s compensation lien is paid in full. The third calculation is apportionment
of financial responsibility for the reasonable expenditures of recovery.
Where, as here, the total lien ($109,923.37) is in excess of the amount
recovered ($100,000.00), the entirety of the reasonable expenditures ($40,045.52)
are charged against Employer’s lien. Employer’s lien is reduced by the full amount
of third-party recovery including the cost of that recovery. Proportionately,
Employer is responsible for the entire cost of reasonable expenditures because
Employer received the entire benefit of the policy limits. Employer’s lien is not
reduced only by the amount Employer actually receives. By “charging” Employer’s
lien for the full amount of reasonable expenditures, Johnson does not bear any of the
costs of litigation. This is fair because Johnson has not achieved any recovery from
the third party, which is the required result because an injured worker is prohibited
from double recovery.
This result is consistent with the controlling decisional law. In Keeler v
Harford Mutual Insurance Co.,17 an injured employee received workers’
compensation benefits and subsequently filed a third-party action. The employee
recovered a judgment against the third party. A dispute arose concerning whether
the workers’ compensation carrier was entitled to reimbursement for amounts it paid
to the injured employee without sharing in the costs of the litigation. Overruling a
17
672 A.2d 1012 (1996).
5
previous decision,18 the Keeler Court held that “the language of 19 Del. C. § 2363
requires that the insurance carrier pay a share of the costs of litigation proportionate
to the amount of its recovery.”19 The Court explained that “not requiring workers’
compensation carriers to bear part of the cost of third party tort litigation where
recovery results in reimbursement of benefits is inequitable and contrary to the
language of the statute.”20 Thus, the workers’ compensation carrier was required to
share in the cost of the litigation, and the carrier’s reimbursement amount was net of
counsel fees.
The Board’s conclusion here is consistent with the holding in Keeler. By
reducing Employer’s lien by the full amount of the $100,000.00 recovered,
Employer effectively paid for all the expenses of recovery of Employer’s lien. On
the other hand, if Employer’s lien was reduced only by the amount actually paid out
to Employer ($59,954.48), then Johnson, the injured worker, effectively would have
assumed the cost of the third-party litigation. Such a result would be contrary to
statute and controlling decisional law, as well as inequitable. Accordingly, the
18
In Keeler, the Delaware Supreme Court overruled Cannon v. Container Corp. of
Am., 282 A.2d 614 (Del. 1971), which “failed to give any significance to the
language in § 2363(e) and (f) which requires apportionment of costs between insurer
and employee.” Keeler, 672 A.2d at 1017.
19
Keeler, 672 A.2d at 1013.
20
Id. at 1014. Reading Section 2363(e) and (f) together indicates that the insurer is
to be reimbursed “after deducting expenses of recovery.” Id. at 1016; see 19 Del. C.
§ 2363.
6
Board correctly assigned the priority of recovery and properly calculated
apportionment of the reasonable expenditures to achieve recovery from the third
party.
Conclusion
The Board correctly concluded that Employer’s worker’s compensation lien
should be reduced by the entire amount of the recovery, including the reasonable
expenses of recovery, leaving Employer with an outstanding worker’s compensation
lien of $9,923.27. Furthermore, the Board properly declined to assign any financial
responsibility for the third-party litigation to the injured worker. Finally, the injured
worker did not receive double recovery. Therefore, for the reasons stated herein, the
well-reasoned decision of the Industrial Accident Board is affirmed because the
Board properly applied the correct legal principles.
NOW, THEREFORE, this 31st day of December, 2020, the decision of the
Industrial Accident Board is AFFIRMED.
IT IS SO ORDERED.
Andrea L. Rocanelli
______________________________
The Honorable Andrea L. Rocanelli
7